Rally in NY, Subprime Layoffs

123jump.com Staff
22 Aug, 2001
New York City

Market averages in new York closed up, 1% higher on merger news. Dubai World agreed to invest in MGM Mirage. E*Trade and Ameritrade explore merger. Oil and natural gas fell. Subprime lending industry laid off 3,500 people and more layoffs are expected. Shanghai closed at a record level as retail investors open more accounts. Japan Prime Minister visiting India, proposed to grow trade five-fold in ten years.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00 AM Mumbai[/R]

[R]Market averages in New York closed nearly 1% higher on the merger news and firmness in Asian and European markets. Subprime mortgage industry laid off 3,500 people, an increasing sign of difficult times for the industry. China’s largest real estate company plans to raise $1.3 billion. Japan and India plan joint projects to increase trade. Brazil surged nearly 4%.[/R]

Dow Jones Industrial Average gained 145.27 to 13,236.13, Nasdaq rose 31.50 to 2,552.80, and S & P 500 advanced 16.95 to 1,464.07.

FTSE 100 Index in the U.K. closed up 109.9 or 1.8% to 6,196.00, in Tokyo Nikkei 225 closed at 15,900.64, down 0.70, and in Brazil, iBovespa Index traded up 1,932.29 or 3.9% to 51,747.37.

Yields edged lower on 10-year U.S. bonds and closed at 4.63% and 30-year bond rose to close at 4.961%.The yield spread between the long and short narrowed as investors pile on to the treasuries.

Crude oil decreased 36 cents to close at $69.21 per barrel, natural gas closed down 23 cent to $5.59 per mBtu, and gasoline futures decreased 7.5 cents to close at 186.37 cents per gallon.

Gold increased $2.50 in New York trading at $668.70 per ounce, silver increased 6 cents to close at $11.73 per ounce, and copper futures lost $50 to close at $7,022.00 per metric ton.

In New York averages raced at the opening above 1% and closed at that level. For the day indexes closed higher after a mild sell-off in the afternoon. Firmness in European and Asian markets helped averages in New York trading. Merger news dominated trading sentiment but the news in the subprime mortgage industry worsened. More than 3,500 people lost their jobs today and more are likely to be announced in the months to come.

Dubai World agreed to purchase 9.5% stake in MGM Mirage and invests 50% in the MGM controlled property development in Las Vegas. TDAmeritrade and E*Trade are exploring merger. Nymex Holdings said that it has held merger talks with several partners and plans to sell its headquarters and cut 150 staff. Toll Brothers reported 85% drop in earnings.

Four large banks in New York reported that they have accessed Fed’s discount window on behalf of their clients. In a joint press release issued by J P Morgan Chase & Co, Wachovia Corp, and Bank of America Corp stated that each bank has borrowed $500 million. Citigroup in a separate statement said that it has borrowed $500 million for their clients. The symbolic move at the urging of the Fed was designed to add liquidity in the financial markets and show that there is no stigma in accessing the funds from discount window from the Fed at a higher rate. Prior to this, Deutsche Bank was the only bank to have accessed the credit facility from the bank according to published reports.

Layoffs in subprime lending industry have begun to mount. Accredited Home Lenders Holding will close its retail lending business in three weeks and close its 60 branches affecting 480 staff. In the wholesale operations it plans to cut the staff by two third and lay off 500 people. After the restructuring action, the total staff at the company will dwindle to 1,000 from 2,600 according to the company. HSBC, large global bank, plans to close its office in Mid-West and lay off 600 staff. Lehman Brothers, one of the three large mortgage brokerage houses on the Wall Street, closed its subprime mortgage operation and lay off 1,200 people. Regional lender, Delta Financial Corp said that it will close offices in California, Florida, and Texas and reduce staff by 300. Total of 3,500 positions have been eliminated in the industry, just today.

Difficulties in the asset backed credit market or commercial paper were evident today and a total of at least 25 companies have been forced to look elsewhere for funding. H&R Block stated that it had drawn $1.05 billion from its $2 billion in credit lines to meet its capital needs. The draw of $200 million was conducted on Thursday and the rest on Monday.

Of the 30 stocks in Dow Jones Industrial Average 2 closed lower and 27 advanced. Of the 30 stocks 16 increased more than 1%. Alcoa led the risers in the index stocks with a gain of 4.3% followed by increases of 2.3% in AT&T, 2.2% in DuPont, 1.7% in General Electric, and 1.6% in Pfizer. JP Morgan Chase and Coca Cola were the only two decliners in the index.

Of the stocks in S&P 500, 416 stocks closed higher and 80 gained, 4 stock closed unchanged. Hercules soared 7.5% and led the rising stocks in index followed by gains of 7% in CIT Group and Nucor, 6.6 % in CenturyTel, 5.8% in Target and Sunoco, and 5.5% in Parker Hannifin, Paccar, and Network Appliance. Affiliated Computer led the decliners with a loss of 3.2% followed by declines of 2.2% in Washington Mutual, 2.2% in Analogic Devices and Abercrombie & Fitch. Bear Stearns, E*Trade, and EOG Resources lost more than 2%.

Asian shares in nervous trading were lifted higher on easing of worries over the U.S. credit market woes. Singapore led the region, rising 2.9% followed by Hong Kong up 2.84%. Australia pushed higher 0.26% spurred by financials. Of the 201 stocks in the ASX 200 stocks, 117 gained, 74 fell while 10 traded unchanged.

In Shanghai trading CSI 30 Index gained 78.98 points or 1.6% to close at 5,051.69. The added liquidity in the market from retail investors has lifted the index 13% during this month. The index has surged 150% for the year so far on strong domestic interest.

In Latin Markets trading Brazil led the region with a gain of 3.8% followed by Mexico with a rise of 2.5%, Chile with a gain of 2.4%, and 2.33% in Argentina. Of the 60 stocks in the Brazil iBovespa index 54 closed higher and 5 closed lower and 1 was unchanged. Brasil Telecom preferred share led the index stocks with surge of 15% followed by 13% rise in Cyrela Commercial, and 10% increase in net Servicios. CVRD and Petrobras jumped 6%. Gerdau and Usiminas increased 5%.


[R]2:00PM New York, 7:00 PM London - UK stocks rose in tandem with higher U.S. and Asian shares, lifted firmer by rate cut hopes and exciting financials. Pound gains strength, as the Confederation of British Industries reports factory orders hit 12-year highs. Rio Tinto secures $40 billion to complete Alcan takeover. HSBC plans to close mortgage office in the U.S.[/R]

London shares moved higher on stronger optimism the US will cut rates and steady market volatility. Mining and financial stocks drove the upsurge. London traded firmer up 1.8% from a slim increase of 0.12% yesterday. Of the 100 stocks in FTSE 100, 98 gained while 4 fell.

In London trading FTSE 100 climbed 1.81% or 109.9 to 6,196.00 amid heightened investor stock appetite spurred by stronger financial results and a potential rate cut in the US. Hopes of a U.S. rate cut came after a US senator said the Fed would use """"""""all available tools"""""""" to calm credit fears. The pound traded firmer against the dollar and yen fueled by speculation the Bank of England may raise rates from the current 5.75% before year-end. To the dollar, it closed firmer 1.99 from 1.98 yesterday. Against the yen, the pound rose to 228.67.
The Confederation of British Industries reported today that manufacturing demand rose 9% in July, the highest increase since 1995. Firms' expectations for output growth were weaker compared to first half, however. Firms producing capital goods, such as industrial machinery, engines and agricultural equipment reported brisk business. Demand for goods such as components, parts and building material fell 11%. In July, the balance of manufacturers forecasting growth dipped to +10% and +13% in August. The average balance from February to June stood at +22%. A CBI index of export orders rose to negative 3% in August from negative 8% in July.

Mining and financial shares rose sharply helped by firming global metal prices. Of the stocks in FTSE 100 index, Lonmin plc led the gainers with a rise of 7.22%. Rio Tinto plc followed up 6.81% after news the mining group had secured $40 billion for the takeover of Canadian aluminum firm, Alcan. Experian Group increased 6.7% with Hammerson plc and Punch Taverns rising 6.61% and 6.40% respectively. Mining stocks Anglo American plc, BHP Billiton plc and Xstrata added over 4% each. BHP Billiton reported full-year to June 30 net profit was up 28% to a record $13.4 billion. Rolls Royce, British Airways and Intercontinental rose over 3%, as oil prices fall below $70/barrel.

Of the FTSE 100 shares, only 4 dropped. Scottish and South led decliners retreating 2.96% followed by BT Group plc down 2.24%. DSG International and Vodafone Group shed 0.62% and 0.26% in that order.

BHP Billiton reported Wednesday net income for full-year to June 30 up 28% to $13.4 billion from $10.5 billion in 2006, pushed higher by firming world metal prices. Sharp Chinese demand has seen global commodity prices on the run. Revenue rose 23% to $46.2 billion. Earnings per share increase to 229 cents from 172.4 cents. BHP Billiton will pay a final dividend of 47 cents, up 31%.

The global banking company, HSBC said it will cut 600 jobs in the U.S. and wound up operations at a mortgage office to contain losses from the subprime mortgage market problems. In the interim to June 30, the company’s provision for U.S. bad debts rose 63% to nearly $6.4 billion. Overall U.S. profit fell 43% in the half-year. The shares closed higher 1.23% in London.

[R]12:00PM New York, 11:00PM Hong Kong - Asian shares finished slightly higher, looking up to US shares and Federal Reserve rates decision. ANZ Bank is under investigation for price-fixing. BHP Billiton posts record A$16.7 billion profit.[/R]

Asian shares in nervous trading were lifted higher on easing of worries over the U.S. credit market woes. Singapore led the region, rising 2.9% followed by Hong Kong up 2.84%. Australia pushed higher 0.26% spurred by financials. Of the 201 stocks in the ASX 200 stocks, 117 gained, 74 fell while 10 traded unchanged.

In Shanghai trading CSI 30 Index gained 78.98 points or 1.6% to close at 5,051.69. The added liquidity in the market from retail investors has lifted the index 13% during this month. The index has surged 150% for the year so far on strong domestic interest.

Yesterday’s rise in interest rate by the People’s Bank of China failed to dampen enthusiasm in the stock market. The bank raised rate by 0.18% to 7.02%. The rate hikes have failed to curb speculation in the housing and stock markets as fresh investment keep pouring in these markets.

Bank stocks gained on the rate hike. Industrial Bank Company rose 1.3%, Pudong Bank jumped 5.3%, and China Minsheng increased 1.2%. China Vanke jumped 3.3% to close at Rmb34 on the news that it plans to raise Rmb10 billion or $1.32 billion to fund residential construction project.

Deals and rising metals prices helped metals and mining stocks. Yunan Copper soared 5.9% on a deal with Chalco, Angang Steel dropped 3%, Chalco soared 10%, and Jiangxi Copper increased 2.7%.

China Citic Bank Corp reported first half profit increase of 87% to Rmb3.21 billion from Rmb1.72 billion a year ago. The loan portfolio jumped 15% to 2.5 trillion yen. Citic completed its stock offering of $6 billion in April, the largest public offering from a Chinese bank.

In Sydney trading ASX 200 Index lifted 0.26% or 15.6 to 6,005.00 riding on a flurry of financial results released today. The Aussie dollar regained strength at 0.8023 for one American dollar. Estimates by the Westpac-Melbourne Institute's suggest economic growth will remain sustainable between now and 2008. The target GDP I expected to grow by 4.5% in fiscal 2007 ending in June 2008. State run enterprise, CBH Group announced Wednesday it expected wheat crop in Western Australia to be between 6 million and 9 million tons due to increased rainfall, marginally up on earlier predictions at between 5 and 9 million tons.

The Australian Competition and Consumer Commission said Wednesday it was probing Australia New Zealand bank on allegations of price-fixing involving deals with Mortgage Refunds. ACCC intends to put a leash on the limit that the broker may reimburse on ANZ housing loans.

Consumer shares, property and bank shares rose. Of the ASX 200 stocks, Independence GRP led with a gain of 9.44% followed by Minara Resources up 8.5%. Downer EDI Ltd surged 7%, Duet Group up 6.5% while OneSteel Ltd closed firmer 6.4%. Media, energy and mining shares fell. Perilya Ltd led dropping 4.3% followed by Mincor Resources down 4.26% and Babock & Brown lost 4.01%. Energy Developers shed 4% while Incitec Pivot eased 3.7%.

BHP Billiton reported Wednesday net income for full-year to June 30 up 28% to A$16.8 billion from A$13.1 billion in 2006. Revenue rose 23% to A$49.4 billion. Underlying earnings before interest, tax, depreciation and amortization rose 27.1% to A$28.68 billion. BHP Billiton will pay a final dividend of 47 cents, up 31%. The stock closed lower 0.28%

Toll Holdings said today full-year to June 30 net profit surged 454% to A$1.279 billion. On a continuing operations basis, the company's profit rose 61 per cent to A$264 million. The company declared a final dividend of 11 cents a share, bringing the full-year dividend to 27 cents, up 22% on prior year. Toll will also pay a special dividend of 5 cents a share, which it said recognized the outstanding performance of the business during the year and the contribution of the Asciano businesses. Revenue from continuing operations pushed up 69% A$7.5 billion in the year to June 30. The net profit figure also included a one-off gain from its restructure, of A$871 million. The share ended higher 0.7%.


[R]9:30PM Mumbai – 11:00AM New York – Sensex in Mumbai trading jumped in firm trading in Asia.[/R]

Afternoon recovery in volatile trading in Mumbai helped Sensex gain 1.86% or 259.60 points to close at 14,248.66. Of the stocks traded on Bombay Stock Exchange, 1,122 gained, 1,568 declined, and 67 were unchanged. The index is still below 10% from its peak in last week in July. CNX Nifty jumped 78.25 points or 1.92% to close at 4,153.15.

Daily turnover in the BSE trading fell to 4,387 crore rupees from 4,867 crore rupees. Of the stocks in the Sensex 30, 27 gained and 3 declined. Reliance Energy led the Sensex stocks with a rise of 6%.

International metals price surge led the stocks of metals and mining companies higher. Sterlite Industries jumped 4.3% to 567 rupees, Tata Steel gained 3.96% to 567 rupees, and Hindustan Zinc increased 2.5%.
Damodar Valley Corporation placed 6,500 crore rupees power projects orders with Bharat Heavy Electricals. The stock jumped 4.7% on the news.
ITC, the largest tobacco company, jumped 4% to 158 rupees. The company is reported to have acquired Australia based Technico Pty.

Banks declined for the third day in a row led by 0.6% loss in State Bank of India. HDFC declined 0.16% to 1,898 rupees.

Real estate declined after volatile morning trading. DLF rose 0.8% to 560 rupees on the news that it has begun operations of IT Special Economic Zone. The company plans to invest 1,000 crore rupees in zone located in Nagpur and is expected to be ready in three years. Unitech led the decliners with a loss of 3.14% to 459 rupees, Ansal API fell 3.2% to 459 rupees, and Sobha Developers declined 1% to 735 rupees.

Deccan Aviation soared 5.2% to 140 rupees after the company raised fares between 500 and 1,000 rupees. The company expects to be profitable by the send quarter of 2008. Separately, Kingfisher Air said that it plans to start a service between Bangalore and San Francisco. Jet Air plans to expand its service to Madrid, Geneva, and Birmingham. Jet Air jumped 3% to 762 rupees.

Mcmillan India gained 2.2% to 263 rupees after its board approved acquisition of Frank Brothers.

Lanco Infratech jumped 1.4% to 241 rupees after the company received to build new terminal at Varansi Airport at price of 89 crore rupees.

Zee News fell 15% to 55 rupees. Bharti Airtel jumped 4.2% to close at 847 rupees as telecom stocks gained in the trading.

[R]9:45 AM New York – Investors bid stocks higher on merger news and no new news in the credit market. Rise in Asian and European markets supported opening rally.[/R]

Markets in Asia and Europe provided the positive support to opening rally in New York. Merger news raised hopes on Wall Street as three popular averages opened higher. Nasdaq and S&P 500 jumped above 1% and Dow traded near 0.8% increase after fifteen minutes of trading.

Dubai World has agreed to pay $5 billion for 9.5% stake in MGM Mirage and 50% stake in CityCenter restaurant and theme park complex in Las Vegas. MGM stock jumped 9% at the opening.

TD Ametritrade and E*Trade are in merger talks according to the web site of the Wall Street Journal. The two online brokerages, if merged are likely to increase competitive pressure in the market. The commissions for online trade have declined more than 80% in the last five years and are likely to fall more as more banks add such services to their clients. Bank of America recently launched service with free online trades to its account holders with balance of at least $25,000.

Nymex, the operator of futures and commodities exchange, released a statement indicating that it is merger talks with NYSE Euronext. The exchange also plans to sell its headquarters building and cut 750 jobs. The stock jumped 6% in the first ten minutes of trading.

Toll Brothers reported third quarter earnings dropped 85% from a year ago. The company earned 16 cents compared to $1.07 per share a year ago. For the first nine months earnings dropped to 72 cents from $3.10 per share a year ago. Revenue in the third quarter declined to $1.21 billion from $1.53 billion a year ago. The backlog at the end of the quarter fell to $3.67 billion from $5.59 billion.

BHP Billiton jumped 3.2% after reporting 28% increase in earnings.

[R]7:00AM New York, 8:00PM Tokyo-Japanese shares eased in volatile trading closing virtually unchanged, as investors await Federal Reserve rates action. Japan trade surplus dips 21% in July on low yen and higher oil prices. Bank of Japan starts crucial two day meeting.[/R]

Japanese stocks finished marginally lower, as several Asian shares rose. Investors largely remained at bay awaiting US Federal Reserve rates cue. Japan closed down 0.7 points. Of the 225 Tokyo stocks, 125 fell, 93 rose and 7 were unchanged. Top 25 gained over 2% while bottom 15 dragged by more than 3%. Broader index, Topix fell 4.99 or 0.3% to close at 1,544.89. Trading volume of the Topix stocks was recorded at 1.7 billion stocks and 2.3 trillion yen.

In Tokyo trading, Nikkei 225 fell 0.7 or 0% to 15 900.64 in mixed trading, as investor concern piled economic growth will slow down. The Finance Ministry said Wednesday customs-cleared trade surplus dropped 21.1% in July to 671.2 billion yen, year-on-year. Exports rose 12% to 7.1 trillion yen with imports surging 17% to 6.4 trillion yen.

The Bank of Japan started a two-day policy meeting Wednesday amid expectations that the central bank will keep its key short-term rate steady following global market turbulence triggered by the U.S. subprime mortgage crisis. The bank is widely expected to maintain the key bank rate at 0.5%. Yesterday a high-ranking official said government opposed any rate hike. The yen dropped to 115.07 per dollar from 114.83 yesterday amid speculation the BOJ will leave rates untouched.

Nikkei 225 index closed down 0.7 points at 15,900.64. Of the 225 stocks in the index 125 closed lower, 93 increased, and 7 were unchanged.

In the index stocks, Chiyoda Corp led the decliners with a fall of 6.2% followed by declines of 5.6% in Meiji Dairies, 3.9% in retailer Isetan, and 3.5% in Kajima, Sumitomo Metals and Mining, and Nippon Sheet Glass. Yahoo Japan led the gainers with a rise of 5.7% followed by increase of 4.5% in Nichirei Corp, 4.3% in Trend Micro, Tosho Corp, and NTT Data. Nippon Oil, Japan Airlines, and Sumitomo Electric closed up more than 4%.

Banks fell as investors worried that rising mortgage defaults in the U.S. may hurt earnings of Japanese banks. Resona Holdings led the decline in banks with a loss of 3.4%. Mitsubishi UFJ dropped and Sumitomo Mitsui Financial fell 1.8%. Shinsei Bank dropped 3.2%. Stocks of real estate and trading companies declined as well. Marubeni Corp fell 2.3% and Mitsubishi Estate declined 2%.

Crude oil in Asian trading fell below $70 per barrel lifting stocks of airlines and chemical companies. Japan Airlines soared 4.2%.